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SYDNEY, May 1 (Reuters) Westpac Banking Corp., Australia's fourth-largest bank, may post a rise of about 12 percent in first-half earnings on Thursday, helped by business lending that is growing at its fastest pace in almost 17 years.

The bank reports a week after Australia's third-largest bank, Australia and New Zealand Banking Group Ltd., reported a forecast-beating 10 percent rise in first-half earnings on stronger lending and lower provisions for problem loans.

Australian banks are benefiting from more than 14 years of economic growth and near 30-year lows in unemployment that have fuelled demand for credit and kept a tight lid on bad debt.

Westpac, which bought fund manager BT Financial in 2002, told shareholders at its last annual meeting that earnings would grow on the back of a strong domestic economy, although competition would put further pressure on industry lending margins.

''Westpac have probably got a higher deposit growth than the other banks and that might mitigate some of the interest margin compression,'' said Peter Vann, the head of investment research at funds manager Constellation Capital Management.

Analysts polled by Reuters forecast Westpac would post about an 11 percent rise in fiscal 2006 cash earnings per share, which is before one-off items and non-cash accounting treatments.

For the first-half ended March 31, analysts expect cash EPS growth of about 12 percent, equating to a profit before one-off items of about A$1.5 billion ($1.1 billion).

(For details of the Reuters poll see table below) ''Intensifying competition and a softer housing credit market shape as the biggest challengers facing Westpac in 2006 financial year,'' credit ratings agency Fitch Ratings said in a report.

ANZ said last week that competition, particularly in mortgages and institutional lending, had contributed to a 7 basis points decline in its net interest margin, a key measure of lending profitability, to 2.29 percent over the past six months.

Commonwealth Bank of Australia Ltd., the country's second-biggest bank by assets, posted a 3 basis points fall in its banking net interest margin to 2.41 percent in February when it posted a 13 percent rise in first-half earnings.

Shares in Westpac, which owns New Zealand's second-biggest bank and has more than 800 branches in Australia, rose 13 percent over the October-March half, but trailed bigger rivals National Australia Bank Ltd. (NAB) and Commonwealth Bank.

St. George Bank Ltd., Australia's fifth-biggest commercial bank, reports its first-half results on Tuesday, with analysts' average forecast for a profit before one-off items of A$503 million, within a range of A$484 million to A$517 million.

NAB reports its first-half results next week.

WESTPAC H1 FORECASTS Average Median Range 2005 (cents) (cents) (cents) result H1 cash EPS 82 81.7 81.2 - 82.9 73 H1 dividend 53.6 53 53 - 56 51 FY cash EPS 168.8 168.6 165.9 - 172.1 151.5 (Notes: The poll is based on seven analysts' forecasts) ($1=A$1.32) REUTERS PV DB1224

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